The Most Important 20 Lessons Learned From 10 Years in Miami Real Estate [Part 1]
As 2018 comes to an end, I look back on 10 years in the real estate business in Miami and thought it would be useful to share some of the most important lessons I have learned from the business. I hope this blog will help serve as words of wisdom to both buyers and sellers and help them make better decisions. I came to realize that after writing what is now my most widely read article: “The 10 Biggest Lies in Miami Real Estate”, it was critical NOT to paint a constant ‘rose colored’ view of the Miami Real Estate Market, giving sycophantic advice where you could not go wrong with anything you buy. Things can go very wrong and what I have learned is that markets shift. Since 2010 the Miami market has had a considerable meteoric rise of property values, but just as Warren Buffet says “It’s easy to make money, but much harder to hold onto it”. This is certainly true of the real estate market and this blog is as much for sellers as it is for buyers. Sometimes you just got to know when to exit a market as well as when to enter it.
My Lessons Learned in Miami Real Estate
These are my most important lessons learned. Lessons that have enabled my clients to become real estate rich, call them the “My commandments” if you will. Some of what I write is not designed to be polite nor even complementary to some of the things I have seen or feel about the market, but it is ALL designed to help my clients better protect their real estate investments and primary property decisions for better future wealth and contentment.
HERE THEY ARE; SOME TO HELP YOU GET RICHER SOME TO STOP YOU GETTING POORER.
1) Miami can be a highly volatile market, but it does not have to be
It can present huge opportunity or devastating consequences. Perhaps it is Miami’s hinge to the very volatile South American markets, and traditionally second home buyers and investors who are fickle by nature. I am almost always asked: “So what is the state of the market?” Where and what you buy makes a big difference. Contact me for more information at 305.508.0899
2) Many developers are looking to make themselves rich not you
I hate to say it, but developers have been giving the same talk again and again. They have said ‘My product is truly great, it’s luxurious, it comes with top of the line finishes’. I have seen the same strategy over and over again with slick videos and marketing. I have been disappointed 90% of the time. It’s more likely to be B$%* S##*! There are a few good developers out there with a good appreciation of quality and they are prepared to act on it with the right spend, but it’s the exception not the rule.
3) Don’t drink the Kool-aid
It is often said that individuals are smart, but crowds are stupid. There is some very slick marketing out there (notably published by developers and builders, while using agents to front the sales). The parties, events, magazine articles will all paint an ultra luxury ‘more perfect than perfect scenario’, and the pitch will encourage you to jump on the bandwagon before it’s too late. Time is of the essence and you are going to have to move fast or you will miss out. Real estate is often driven by herd mentality. Luxury buyers who want to graze where other luxury owners currently reside. It’s normal human behavior.
4) ROI and Labor intensity goes hand in hand.
As investment, typically houses do provide better yields than condos. Maintenance of a home: Pool and yard is typically much less cost than condo maintenance fees. Additionally appreciation of homes is historically better than condos, because the supply of homes will always be limited to land available (you may see only a couple of dozen new homes in a neighborhood while condo supply can spike by 1000’s within one neighborhood by a matter of 3-5 years). The problem however is that houses require a lot more management.
5) The most important indicator for the markets health IS months of inventory
Supply / Demand economics are the backbone of recognizing a healthy market. There are many indicators that are important but none more so than this. 6 – 9 Months is a healthy market below $1M, 12-18 months is healthy in the luxury $1M+ market. Less months means prices will go up, more and prices will go down. How fast they go down depends on absorption rates. Floor and ceiling prices are important too, but they all play into months of inventory.
6) Play the Player not the Game
If you want to read the real estate market effectively, much like Poker, play the player NOT the game. What do I mean by this? Market movements are about reading human psychology; herd mentality plays a big role in tracking market movements. Spending 10 years in the business I spend a lot of time reading people. Once I learned how to understand their hopes and fears I was able to start effectively reading the market. Human psychology is at the root of the real estate business and reading not only how to predict the markets, but how to sell homes or condos is about knowing what are the triggers that make people buy.
7) Primary markets / neighborhoods outperform investment markets / neighborhoods. Every time!
Primary markets always outperform investment markets and so do condos with more primary residents that tenants. This should make total common sense, but for some reason buyers often seem to overlook this very important factor.
8) It’s called an economic cycle for a reason and Miami has typically rather aggressive ones.
I entered the Miami Real Estate Market in 2008. I remember when the proverbial S#$T hit the fan! After the market dropped we saw many buyers swoop in and buy up units at literally half the price of their original pre-crash value. Inventory absorbed at lightening speed and builders started the process of construction all over again. But as much as the values went up they started to correct and in 2018 we see many of the Brickell condos back at their 2011 numbers. Lesson here is: Know it’s a cycle and know when to step out as much as when you should step in.
9) I don’t spent $100,000 on lottery tickets for a reason!
As much as I value and appreciate different tastes and styles of homes and feel I have a solid appreciation of construction quality and the subtle nuances, I also recognize that EVERY property must still sell within the constraints of the market. I am often asked to get that price that no other home in the neighborhood can obtain off the back of the unique ‘beauty and finish’. Putting a listing at an extreme price results 99 out of 100 times in an expired listing. This is the reason we in the business say; you want to be the second listing agent on a $20,000,000 listing not the first. Because the first never is the one who sells it.
10) Everybody thinks there baby is the most beautiful.
I have experienced in 10 years a number of owners who have come with the same comments when I have interviewed for a listing: “I expect to find a buyer who will appreciate the true beauty of my property. They will love it, like I love it, because there is no other property like it”. THESE HOMES NEVER END UP SELLING AT THE PRICE THEY WANT. Because as beautiful as you think your house is, you have to accept that not everyone else will.